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Court: Dark Money Donors Must Be Disclosed

cmdi | Mon Jan 23, 2023

A recent federal court decision may have long-lasting repercussions for 501(c4) organizations engaged in political activity.

Ruling on the “dark money” issue in Citizens for Responsibility and Ethics in Washington vs. Federal Election Commission, Chief Judge Beryl Howell found that 501(c)4 groups making independent expenditures in federal races must disclose donors contributing to independent expenditures. In a case that started in 2012, Howell wrote that 501(c)4 organizations making independent expenditures of more than $250 in a calendar year must disclose each donor who contributed more than $200 towards that IE. This information must be reported in regular filings to the FEC.

According to NPR, this decision vacates a FEC regulation dating back to 1980:

Chief Judge Beryl Howell, of the U.S. District Court for the District of Columbia, threw out a regulation adopted by the Federal Election Commission in 1980. The rule said that “non-political” groups, such as 501(c) nonprofit organizations, could ignore a disclosure law if donors' contributions were not earmarked for specific advertisements — an exception that wasn't in the law passed by Congress.

Will there be an appeal?

While the FEC could appeal the decision, it would require a unanimous vote by commission members. Regulations require that all actions receive four affirmative votes by commissioners, and there are two unfilled positions. Current members are split between two Republicans, one Democrat, and one independent, so a unanimous vote is unlikely.

Crossroads Grassroots Policy Strategies could also file an appeal, and NPR reports:

CREW's lawsuit focused on FEC treatment of spending by the 501(c)(4) group Crossroads GPS, and Crossroads intervened as a defendant. Spokesman Chris Pack said Monday evening, “This was wrongly decided and we will proceed accordingly after reviewing an array of legal options.” Crossroads GPS spent $71 million on independent expenditures in 2012, the cycle examined in the lawsuit. It was dormant in the 2016 elections.

What happens next?

The FEC now has 45 days from the date the decision was released on August 3 to issue interim regulations and 30 days to reconsider the original complaint filed by CREW. It is unclear what will be required for the 2018 mid-term elections.

Which donors must be disclosed?

The ruling in CREW vs. FEC only applies to independent expenditures, which the FEC defines as:

An expenditure for a communication that expressly advocates the election or defeat of a clearly identified candidate and is not made in cooperation, consultation or concert with, or at the request or suggestion of, any candidate, or his or her authorized committees or agents, or a political party committee or its agents.

According to the Center for Responsive Politics, 501(c)4s can engage in issue ads:

The ruling only applies to what the FEC terms “independent expenditures” — that is, communications that explicitly call on voters to support or oppose certain candidates. While independent expenditures make up a significant portion of “dark money” spent in elections — more than $733 million since 2010, when the Supreme Court’s Citizens United decision came down — it is not the only way dark money gets into elections. These groups spend heavily on stealthy political ads framed as “issue ads,” and this decision will not affect their ability to buy such ads in the future.

What is CREW vs. FEC?

On November 12, 2012, CREW filed an administrative complaint against Crossroads GPS for IEs made during 2012 election cycle. CREW maintained that Crossroads GPS should have disclosed the donors contributing to the $6 million spent trying to defeat Senator Sherrod Brown (D-OH).

Three years later in November 2015, the Commission failed to get the required four votes needed continue with the investigation  with a 3-3 tie. One month later, they unanimously voted to dismiss the complaint.

The following February, CREW filed a lawsuit in the U.S. District Court of the District of Columbia. On August 3, the court ruled:

The court found that subsection (c)(2) requires supplementary reporting for a subset of donors under (c)(1)—donors of over $200 who contribute “for the purpose of furthering an independent expenditure.” The court found that “an independent expenditure” referred to any unspecified independent expenditure: “[u]se of the indefinite article ‘an’ before ‘independent expenditure’ indicates a broader coverage than a particular, specified independent expenditure and instead means that disclosure must be made as to each non-trivial donor contributing to fund ‘an independent expenditure’ to a candidate, without regard to the actual reported form of the express advocacy funded by the expenditure.” The court stated that subsections (c)(1) and (c)(2) must be read together to avoid rendering any part of the statute “inoperative or superfluous, void or insignificant,” and that doing so is “essential to ensuring meaningful disclosure.”

For more information on CREW vs. FEC, please see the FEC's website.